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OR - Local craft distillers join together to promote common interests

Since opening Crescendo Spirits in 2013, Kyle Akin says he’s barely received a paycheck from his craft distillery in Eugene.

Craft distillers have more difficulty succeeding than craft beer and wine counterparts, partly because of regulations governing his industry, said Akin, who also works as a part-time engineer.

Last summer, Akin led the organization of a new group called the Southern Willamette Craft Distillers, which started with Crescendo Spirits, Elixir Spirits and Thinking Tree Spirits, all of Eugene, Swallowtail Spirits in Springfield, and others.

The group’s members want to increase visibility of their distilleries by making the area a craft spirits destination. They have developed a promotion that gives visitors a discount at each participating distillery. And the distillers are lobbying for changes in state regulations so they can make more profits from sales of liquor at their businesses.

“If anything, we’re hanging on mainly for the passion of (making craft spirits), and for the promise of, hopefully, succeeding and introducing game-changing legislation,” Akin said.

Oregon’s craft distillery industry has grown in recent years. The state now has about 70 distilleries, a jump from 20 in the early 2000s.

But only a handful of the state’s distilleries are thought to be profitable, said Christian Krogstad, president of the Oregon Distillers Guild and owner of House Spirits in Portland, a craft distillery.

Distilleries are regulated by the Oregon Liquor Control Commission, which is closely involved in the distribution and sales of liquor through approved retail outlets and bars and restaurants.

Akin said state regulations limit the ability of distillers to sell their products where they are manufactured and to make a profit.

Distillers are allowed to serve only up to five, one-half ounce servings at their locations per customer. Many craft distillers serve mini cocktails to tasting room visitors. At Crescendo Spirits, Akin charges about $5 for a mini cocktail.

“After that, we can’t do anything else,” he said. “You can buy a bottle of our stuff, but you can’t consume it there. You show up to a distillery, you’re done in a half hour and you’re out. We’re not a destination.”

To serve more alcohol, craft distillers can obtain a special event permit that allows them to provide full-size drinks. However, some distillers say the process is complicated and costly.

Distillers are allowed 62 special event permits per address annually. Each one must be approved by the city where the distillery is located, and the Oregon Liquor Control Commission.

The OLCC charges $10 for a permit and cities often have their own fee, such as Eugene, which charges $35. Also, distillers are required to provide customers with at least three options for hot food.

The special event permit system isn’t intended to be used by a permanent ongoing business, said OLCC spokesperson Christie Scott. Still, businesses could potentially use a permit for every weekend of the year, she said.

If distillers want to sell full-size cocktails, they could get a commercial liquor license, which costs $400 annually and also requires restaurant service, Scott said.

But Akin said the food requirement is too expensive.

“For many of us, we’re so strangled by the system that we have a hard enough time hanging on to the place we have,” Akin said. “Now you’re asking us to have a kitchen?”

State revenue debate

Akin also said he wants distillers to keep more of their sales revenue. Currently, the state receives about 28 percent to 42 percent of the revenue from bottles sold at distilleries and liquor stores.

The OLCC must agree to accept liquor from distilleries before the agency ships the products to its network of approved liquor stores. The agency stores bottles in its massive central warehouse in Milwaukie, south of Portland, before it ships them to liquor outlets.

Because the OLCC plays no role in assisting the sale of spirits in distilleries, some manufacturers view revenue collected from distillery sales as an unfair tax.

Scott said the money goes to state, county and city programs.

“There’s this age-old debate about whether it’s a tax,” she said. “It’s revenue that benefits the city.”

The OLCC said that in the 2015-2017 state budget cycle, the revenue it collected from liquor sales, license fees, and taxes collected on beer and wine, provided more than $465 million to state and local governments. Of that total more than $264 million went to the state’s general fund to help pay for schools, police and public health programs, the OLCC said.

Depend on networking

With limited marketing funds, distillers rely on networking to spread word about their business.

Marketing has been a key struggle for area distilleries, Akin said.

“Oregonians love to support Oregon,” he said. “They absolutely will support distilleries if they even knew they existed.”

Seven of the eight craft spirits makers are participating in a new promotion. For $10, consumers buy a “passport” that gives them such discounts as free tastings or shot glasses at the distilleries. The freebies are worth about $5 to $10 at each business. The passport booklet contains a map showing the locations of the distilleries and information about each business.

The Southern Willamette Craft Distillers is modeling their passport after Distillery Row in Portland, where a cluster of distilleries named their area and offered a similar promotional program.

“We wanted a way to support each other,” said Kevin Barrett, owner of Swallowtail Spirits in Springfield. “With all of us being in (the passport program visitors are) not going to just go to one distillery, they now have a reason to go to more than one.”

The passport may also be helpful in raising awareness of distilleries that are located farther away from other retail businesses, he said.

Though plans are still preliminary, future ideas for promotions include classes on whiskey and limoncello making, as well as an expo night for area distilleries, Barrett said.

To attract customers, distillers rely on relationships with business people and the public to promote sales of their products.

For example, Emily Jensen, who co-owns Thinking Tree Spirits in Eugene, provides free space in her business for such events as the Whiteaker Community Market.

Craft distilleries sell their products to customers, including bars and restaurant, through OLCC-licensed liquor stores.

Barrett, of Swallowtail Spirits, sells vodka, gin and products in about 100 liquor stores. He said most of his success in placing his products in stores relies on talking to liquor store managers.

Sometimes, getting their craft spirits in a liquor store requires distillers to meet with a store’s major customer, such as a bar or restaurant, said Andrea Loreto, co-owner of Elixir Spirits in Eugene.

Once distillers get a restaurant or bar on board, they inform the liquor store so the retailer will order the product from the OLCC warehouse.

On top of the extensive one-on-one marketing, Barrett also sends representatives every six to eight weeks to talk to liquor store customers about new Swallowtail products.